Special Market Alert

One item I like to watch for an early indication of a pullback is the advance/decline line.

The advance/decline line is a running total of stocks advancing vs declining and it can highlight weakness in the broad market while the headline indexes are looking good.

Picture a tree rotting from the inside – the bark looks great but the supporting wood is rotten. The problem is you can’t see the rot until the tree falls (hopefully not on something you own – like your portfolio?).

In this case, the A/D line is showing a negative divergence as shown in the chart. This is an early warning sign of market weakness but a sign ignored at your own peril

Today the technical situation has changed sufficiently to remove this worry stone from the trading strategy – at least for the immediate future.

Advance/Decline Line 01222017

Today’s trading has reversed the technical situation back to a more bullish situation.

The advance/decline line has notched a new high which effectively removes the negative divergence I discussed.

This mornings market was under pressure from the government shutdown.

But by the afternoon news starting circulating that there was an agreement ready to be signed by President Trump that would re-open government operations.

As soon as that news hit the wire the market took off like an excited race-horse that had just been treated with a red-hot branding iron!

The market turned positively bullish by the afternoon pushing headline indexes to new highs with the S&P500 jumping almost 1%

As of 930 pm, eastern time, news was issued that Trump has signed the agreement and the government will re-open for business immediately.

Suggested market posture for the remainder of the week

Based on today’s market action I will be actively seeking new portfolio investments from the best-stocks watchlist using these investing strategies.

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